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Debts

Debt consolidation: what it costs

What happens to your payments when you put several debts into a single loan: how much you pay today, how much you would pay afterwards and what the difference costs in total.

What it does

It starts from up to five debts (balance, annual rate and remaining months for each one) and compares that payment with the one from a new loan that brings them together. The capital of the new loan is the sum of your balances plus the opening fee calculated on that sum plus the expenses you declare, because that is precisely what a loan of this type finances: the expenses go inside.

The large result is the difference between what you will pay in total and what you pay today. It comes out positive when consolidating costs more in total and negative when it costs less, and the sign is that of the result, not a judgement on the operation. The detail shows today's payment, the new payment, the monthly relief, the new capital, the totals, the interest on each side and the longest term you have today against the new one. The chart accumulates what has been paid month by month in both cases.

Key concepts

  • Consolidating means changing contract: consolidating replaces several contracts with a new one, on other terms. The result therefore depends on the rate and the term of the new loan, which here are assumptions that whoever is reading writes and whose label says so.
  • The cost can be a lower payment or a more expensive debt: with the sample values (8.000 at 9 % over 48 months, 4.000 at 18 % over 30 months and 2.500 at 22 % over 24 months), the payment goes from 495,33 to 203,76 a month, a relief of 291,58; but the total rises from 17.665,25 to 19.560,57, and the difference, 1.895,32, is what the operation costs in money. Both numbers are true at once and they are about different things.
  • The opening fee goes into the capital: it is calculated on the sum of the balances, and that is why the new interest is on a capital larger than the debt you are cancelling. The other way round (deducting it just once) would give a new total lower than it really is.
  • What this account does not include: these are amounts that exist in a real operation, such as the penalties for cancelling each debt early, the cancellation fees each contract may carry, the notary, registry and valuation costs, insurance if the new loan requires it, and the time the operation takes. They are amounts that depend on specific contracts, and this calculator does not make them up. The expenses box is there for those you do want to put into the account.
  • The longest debt dictates the term: the detail shows the longest term you have today so that you can compare it with the new one. Consolidating usually lengthens terms, and that is a cost that does not show up in the monthly payment.
  • Constant assumptions: the rates you enter apply to every month of the calculation. If a debt is variable-rate, the result is an account with a constant rate, not a forecast.
  • Privacy: balances are personal data. This calculator does not read them from the browser address nor write them into it, and nothing leaves your device: there is no sending and no storage.

Sources

  • The payment account is the same one used by the [mortgage payment](/herramientas/hipoteca) calculator, with the French amortisation system and the annual interest rate divided by twelve. The opening fee and the expenses are those declared by the new loan's contract, not an official rate.
  • The amounts are those written by whoever is reading. There is no market figure behind any of it.

Frequently asked questions

Is consolidating cheaper or more expensive?

It depends on the rate and the term of the new loan. With the sample values the payment falls, but the total to be paid rises by 1.895,32 €. The large figure of this calculator is that difference in totals, with its sign: positive if it costs more, negative if it costs less.

Does the payment always fall when you consolidate?

No. The new payment depends on the rate and the term you decide on, and on the fee and the expenses that are financed. It can fall a lot, fall a little or even rise. The account shows all three at once.

What happens with the cancellation penalties?

They do not enter the calculation. Each contract may have a fee or penalty for cancelling ahead of time, and those are amounts that depend on each specific debt. To see their effect you can add them in the expenses box that finances the new loan.

What other costs are left out of the account?

The notary, registry and valuation costs, insurance if the new loan requires it and any fee other than the opening one. The expenses box exists so that you decide which ones you want to include, but this page does not calculate them for you.

How is the opening fee calculated?

On the sum of all the balances, as a percentage. It is a cost that is financed along with the debt, so it also generates interest over the whole new term.

What happens if I have fewer than five debts?

Steps 4 and 5 come collapsed and empty. Leave the balance blank for the ones you do not use: the account ignores the blank steps. With all the balances empty there is nothing to calculate, and the page says so.

Is the rate on the new loan official data?

No. It is an assumption that you type, and its label says so. This calculator does not estimate what rate you would be offered nor says which one to pay: it does the account with the number you give it, without saying what rate would be appropriate.

Are the data stored or sent?

No. The balances live only in your browser, they are not written into the page address and they are not sent anywhere. There is no sign-up and no storage.

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